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Morris Manning & Martin, LLP

Supreme Court Rules Against Company Seeking to Dismiss Class Action Through Use of Unaccepted Settlement Offer of Judgment

01.22.2016

On January 20, 2016, the U.S. Supreme Court ruled that companies cannot moot claims in class action lawsuits by making an offer of complete relief to the named plaintiffs. In Campbell-Ewald Co. v. Gomez, No. 14-857, the Court ruled against an advertising company, which argued that its offer of judgment to the named plaintiff mooted the plaintiff’s individual claim and the putative class claims.

The case involved a nationwide class action filed by Jose Gomez, who alleged that Campbell-Ewald Company (“Campbell”) violated the Telephone Consumer Protection Act (TCPA) by sending unauthorized text messages. The TCPA allows the greater of actual damages or $500 for each violation. If the violation is deemed willful, the court can award three times the greater of actual damages or $1,500. Before the deadline for Gomez to file a motion for class certification, Campbell offered to pay Gomez his costs, excluding attorney’s fees, and $1,503 per text message, thereby satisfying his personal treble-damages claim under the TCPA.

Campbell argued that its offer of judgment (which was made pursuant to Federal Rule of Civil Procedure 68) mooted Gomez’s individual claim by providing him with full relief. Campbell also contended that Gomez’s failure to move for class certification before his individual claim became moot caused the class action claims to become moot as well.

In a 6-3 decision, the Supreme Court disagreed, ruling that an unaccepted offer of judgment does not moot a named plaintiff’s claims. Justice Ruth Bader Ginsburg’s majority opinion stated that the Court’s decision was based on “basic principles of contract law.” Justice Ginsburg’s opinion noted that absent Gomez’s acceptance, Campbell’s offer of judgment remained merely a proposal and did not bind either party.

The Court’s decision means that companies cannot rely on an unaccepted offer of judgment to dismiss a class action, even if the offer is made before the plaintiff moves for class certification and the offer would provide full relief to the named plaintiff. The Court did note, however, that it was not addressing the situation where the plaintiff actually accepts the defendant’s offer of judgment.

For more information, please contact authors Bob Alpert, Jeff Douglass or Doug Hance.